181
Banks will have to meet strict capital requirements to hold bitcoins and other cryptocurrencies under a new international regulatory plan aimed at protecting financial stability in a volatile market.
The Basel Committee on Banking Supervision said Thursday that the banking industry faces increasing risk due to cryptocurrencies due to the potential for money laundering, reputational challenges and large price swings that could lead to bankruptcies, Bloomberg reports.
The panel, which is a group of banking supervisors, proposed to apply a 1,250% risk weight to banks' exposures to bitcoins and some other cryptocurrencies. In practice, this means that a bank may need to hold $ 1 in capital for every $ 1 in Bitcoins based on a minimum capital requirement of 8%.
The growth of cryptocurrencies and related services has the potential to increase concerns about financial stability and increase the risks faced by banks, "said a report by the Basel Committee, which includes the Federal Reserve and the European Central Bank (ECB). ). "The principal will be sufficient to absorb the complete cancellation of cryptocurrency exposures without exposing depositors and other senior creditors to losing banks.
The Basel committee's proposal is open to public discussion before it goes into effect, and the structure cautions that initial policies are likely to change as the market develops.
The popularity of cryptocurrencies has grown especially this year, as it applies to leading currencies, such as bitcoin, as well as newer and lesser known ones. Enthusiasm for institutional acceptance, the idea that cryptocurrencies can be used to store value, and support from big names in investing like Paul Tudor Jones and Stan Druckenmiller have further fueled bullish market sentiment.
The price of bitcoin reflects this enthusiasm. It went from about $ 10,000 last September to about $ 63,000 in mid-April. But in the past month, the value has nearly halved to $ 37,000 today due to regulatory restrictions in China and Elon Musk's criticism of the environmental footprint.
By GeorgiTermi
You may also like: The Introduction Of Digital National Currencies Could Raise Interest Rates
